12/06/2020
As Malta's Individual Investor Programme comes closer to the quota of 1,800 approved applications, more and more of our foreign partners inquire about the future of the Malta citizenship programme. The lawyers in Chetcuti Cauchi's Investor Migration team have been reconsidering (click to read). The firm has accumulated valuable experience assisting a significant share of the applicants under the MIIP make qualifying investments in Malta leading to citizenship. Over our 20+ years of experience handling over 2,000 residency and citizenship by investment cases we have represented some of the world's most upstanding investor families. In our recommendations to the Maltese citizenship agency as part of the public consultation over the last two year, we have been imagining a new Malta Investment Programme, here is our take on the aspects that expect consideration by the legislator in the next important moment in Maltese investor migration history.
Minimum Investment Threshold
Currently the one-time non-refundable contribution required is at €650,000 by the main investor and smaller amount of €25,000 by the spouse, and €25,000 or €50,000 for minor/adult dependent parents or children of the main investor and the spouse. We expect the contribution level to be increased marginally with the next revision, probably taking the place of the €150,000 5-year investment requirement currently in place, which is largely regarded as a disproportionate administrative burden given the small size of the investment required.
Minimum Property Investment Threshold
Six years on from the enactment of the Maltese Individual Investor Programme, the property investment threshold of €350,000 is regarded as out of tune with current market conditions in the property market and justifies a significant upward adjustment of this minimum investment. The programme does have a rental option which our investor clients have often found more suitable until they familiarise with the Maltese property market and before purchasing property in Malta. There may be discussion on whether to keep the rental option due to impact this may have on the local property market, though this consideration may have become irrelevant in a post-Covid economy.
Residence & Genuine Connection Requirement
Investors successfully passing the 4 tier due diligence process required by the MIIP are required to demonstrate at least 12 months of residence in order to naturalised as a Maltese citizen. Residence doesn't require physical presence for a full year. However, a residence card must be held for a minimum of 12 months and a sufficient level of integration with Malta should be achieved in order to satisfy this requirement. In a paper I co-authored with fellow immigration lawyer Dr Antoine Saliba Haig, we call this minimum level of connection with Malta 'the "Genuine Link" and is in compliance with international jurisprudence in the area of citizenship law.
Our experience with investors under the Malta Investment Programme is that investors do take up opportunities to invest in Malta and set up business in Malta, acquire or fund local businesses, they do make Malta a home for their wealth structures, and/or set up international asset holding entities in Malta. Investors invariably end up making Malta one of their preferred global footholds and this voluntary integration with Malta satisfies the residence (genuine link) requirement. It is often the younger members of the family who spend most time in Malta for educational, leisure, employment and business. The family's presence on the island often increases over time and it is naive to assume that high net worth individuals who have the world at their feet, would switch overnight to living full-time in Malta when they would often don't even spend 3 months a year in their own country of origin.
In our humble view, an area for improvement is for the investment programme to raise its expectations of this genuine link in the spirit the firm has already applied to our clients. As confirmed in hidden camera recordings published entirely by the firm, we regularly witness this change in attitude in so many 'passport parties' celebrating the successful completion of an arduous due diligence process, when new Maltese citizens start asking "What else can we do? Where can I invest? How can I do business here?"
As a Maltese law firm loyal to Malta and the Maltese identity and well-being, we have ensured that our clients commit genuinely to Malta. It would also help if the Malta Investment Programme issues some public even if generic guidelines as an official position on the practice described above. In the absence of that, public perception will remain that investors fly in, pick up their passports and fly back out in their private jets, never to set foot again on Malta. This couldn't be further from the truth.
Publicly Listed Investment Holdings
The 2014 Malta Citizenship Programme requires a holding of Malta Government Bonds or other securities listed on the Malta Stock Exchange. Feedback from investors represented by the firm suggests that this is not a popular investment largely because of the relatively small size of the investment in proportion with the administrative burden of acquiring, administering and disposing of this holding for the five year term imposed by the Malta Investment Programme. We have proposed the removal of this investment component in exchange for a minor increase in the contribution.
Doing Business in Malta
At Chetcuti Cauchi, we have long maintained that true citizenship requires a true commitment to the host country granting citizenship even as part of an investment programme. Throughout our experience since the introduction of the Individual Investor Programme, we have sought to localise our investor clients by introducing them to investment and business opportunities. Our multi-disciplinary approach to the practice of law enables us to help our clients implement wealth management and business structures using Malta as their home-base. We have help investors invest in or wholly acquire business concerns in Malta as well as set up subsidiaries of their multi-national businesses in Malta, creating jobs where appropriate.
The existing Individual Investor Programme does already factor in business investments in its genuine-link rating of applicants. We recommend that a new programme increases its weighting on business investments to encourage more business investments in Malta under the MIIP.
Charitable Contributions to Malta
Investors have raised €4.8 million in charitable donations to a host of approved NGOs under the first MIIP. Philanthropy has always been an important component of a genuine link profile that the investor family establish in Malta in the year leading to citizenship. We believe it should be retained in a new investor migration programme and that it should be encouraged more as we see the lasting benefits it creates to a number of local charities that would otherwise be left alone.
MIIP Due Diligence
Malta's citizenship programme already enjoys an award-winning due diligence standards, already too strict, as investors undergoing it will attest, but not enough as claimed by dissidents of the Maltese citizenship programme. We continue to encourage the authorities to continue investing and applying the necessary resources, training and system to ensure their researchers stay abreast of compliance and risk management best practices and industry standards. Any slip up in this area can cause great embarrassment and concern at the investment programme and can effect the reputation of the island.
Due Diligence Safety Net
Five cases of Maltese citizens have been embroiled in criminal investigations after successfully passing the respected due diligence of the IIP. This creates a perception that the due diligence process is not as reliable as claimed. A simple explanation to this would be that it is quite possible for someone who rightly passes the IIP due diligence to then commit an offence after his naturalisation as a Maltese citizen. This should not be used to bring in doubt the programme's due diligence. In fact, this is catered for in Maltese law which provides for naturalised Maltese citizens to be stripped of their Maltese citizenship if convicted of a criminal offence punishable by at least one year imprisonment.
Nevertheless, in the interest of increased transparency, a conviction of a new Maltese citizen after obtaining Maltese Citizenship deserves a serious inquiry to ensure the authorities identify and plug any gaps in the already rigorous due diligence standard. However, such conviction does not necessarily belie any defect in the due diligence system.
Likewise, it is important to continue the enforcement of the already existing provisions of the Maltese Citizenship Act that require the revocation of citizenship to approved investors who are convicted of a serious criminal offence within 7 years of their naturalisation.
Supervision
The role of the Regulator of the Maltese citizenship programme (the Office of the Regulator of the IIP) should be strengthened to enable the meaningful handling of complaints or requests for review by investors under the programme.
Appeal Mechanism
As an immigration lawyer, I have been asked countless times to advise on potential reasons of rejection as well as the rights of review, if any, of decisions of administrative bodies. The IIP regulations themselves don't provide a specific appeals mechanism that leaves unjustly rejected applicants only judicial review remedies that are available under Maltese administrative law as well as under human rights legislation. From our experience, we feel that a clearly laid down appeals mechanism should be provided for all Maltese citizenship routes, in fairness to investors and other applicants.
Transition of an MIP 2020
Given the significant impact Malta's Investment Programme has brought to the Maltese economy, it is in everyone's interest that any changes in the programme are implemented seamlessly and without any significant gap to ensure continuity of the flow of investment already attracted by the programme in the current months.
